OML 113 is well known to us and it is a fantastic asset that covers the spectrum of field types from current oil production to several appraisal plays.
Osamede Okhomina, ADM Energy chief executive
What it owns
Newly refocussed, restaffed and re-energised – ADM Energy Plc (LON:ADM has emerged out of the remains of the MX Oil vehicle and its attentions are initially pointed on the OML 113 asset, which includes the Aje field.
Aje has multiple oil, gas and gas condensate reservoirs.
ADM has sought to build on this initial asset base through other investment opportunities across the West African region in the oil and gas sector.
How it is doing
In March ADM conditionally agreed to invest in the development of the Barracuda oil field.
It is located in OML 141, an existing discovery and near-term production asset in swamp/shallow waters offshore Nigeria.
The investment will be by way of an acquisition of a 51% interest in KONH, which holds an indirect interest in a Risk Sharing Agreement (RSA) for the field. It is expected to complete in the second quarter this year.
KONH holds, through its subsidiary Noble Hill – Network Limited (NHNL), a 70% indirect interest in the rights, benefits and obligations under the RSA relating to the Barracuda area of OML 141.
ADM Energy arranged an (oversubscribed) fundraising for its stake in the Barracuda field.
The placing and subscription offer raised £1.22mln through the sale of 28.71mln new shares priced at 4.25p.
What the boss says: Osamede Okhomina, chief executive
“With plans to drill a new well in Q4 2021, and multiple additional wells thereafter, the Barracuda field has the potential to come on stream later this year and bring significant increases in production volumes and cashflows to the company thereafter.”
What the broker says
Stockbroker Arden Partners repeated a ‘buy’ recommendation after the company’s latest deal, to acquire an interest in the Barracuda.
Arden also upgraded the price target from 10p to 14p.
In a note, Arden analyst Daniel Slater highlighted that Barracuda brings potential for significant production additions.
“Barracuda has four existing wells, and ADM plans to drill a fifth well in order to carry out a flow test in Q4 2021,” Slater noted.
“On success this well would be brought onto production and a further five wells then drilled.
“Based on existing Barracuda data and field analogues, ADM estimates each well could produce at 4mbbl/d gross, recovering 73mmbbl overall from the D-1B reservoir. There is then further potential at other reservoir levels.”
Slater’s ‘risked’ valuation sees the Barracuda stake being worth 14.1p per share, based on a US$65 per barrel brent crude price, whereas a US$55 oil price sees the stake worth 9.6p per share.